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Failure to Comply with an Unless Order – Relief from Sanctions denied

Failure to Comply with an Unless Order – Relief from Sanctions denied

November 30, 2015

In the case of Thomas Ian Sinclair v Dorsey & Whitney (Europe) LLP and others Mr Justice Popplewell refused to grant relief from sanctions under CPR 3.8 and CPR 3.9 on the basis that the Claimants had breached an unless order, and where neither the requirements of the rules, nor the three stage test enshrined in Denton had been met.

The issue of prejudice was held to be “insufficient” and where to have allowed re-instatement, would have meant that the new approach to procedure would have been “turned on its head”.

Background

The Claimants applied for relief from sanctions under CPR 3.8 and CPR 3.9 arising from their failure to meet the deadline for providing the Defendant with security for costs.

The Claimants had claimed damages of over £30 million against the Defendant firm of solicitors for alleged professional negligence in failing to advise the Claimants that they could seek permission to sell certain shares that had been the subject of a freezing order. The Claimants were claiming for lost opportunity to sell and also alleged overcharging by the Defendant. A judge ordered the claim to be struck out because the Claimants had failed to comply with an unless order to lodge security for costs, within a generous time period.

The order stated that the security for costs was to be paid in cash or some other form acceptable to the Defendant. Further, the Claimants were ordered to provide the Defendant with a copy of any after the event insurance policy, by a deadline. The Claimants advised the court that security would be provided by an already arranged ATE but did not provided the Defendant a copy. The Claimants also made several requests at the last minute for extensions of time.

Eventually, the Claimants confirmed that their solicitors had come off the record because the Claimants alleged they were unable to pay their fees. The ATE policy had to be signed by their new solicitors, which delayed matters further. An unless order allowing the Claimants 14 days to pay was made as the Claimants’ “last chance”. The Claimants did not ask the Defendant for agreement to the ATE policy in time, and the Defendant objected to the ATE in that form. The result was that the Claimants failed to meet the unless order deadline and their claim was struck out.

The Claimants submitted that there were good reasons for their breach and that refusal of their application to grant relief from sanctions would prejudice their £30 million claim, which, they believed, had a real prospect of success.

The Decision

Sitting in the Queens Bench Division of the High Court, Mr Justice Popplewell held that CPR 3.9 provides that on an any application for relief from sanctions imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case so as to enable it to deal justly with the application including the need for the efficient conduct of the litigation at proportionate cost and the need to enforce compliance with rules, practice directions and orders. He noted that an application for relief must also be supported by evidence (CPR 3.9(2)). The three stage test in Denton was also considered.

Mr Justice Popplewell noted that not all sanctions were equal and there was a difference between a stay and an unless order. Whereas a stay gives a party extra time, an unless order finalises a matter. Here, the Claimants’ actions in leaving matters to the last moment and then asking for extensions of time was not acceptable. There was a protracted history of the Defendant seeking security for costs from the Claimants and repeated failure by the Claimants to provide the same.

In considering and applying Denton, Mr Justice Popplewell held that this was a serious and significant breach by the Claimants, where there was no apparent good reason for that breach. Further, there was no frank evidence from the Claimants about their assets and their alleged impecuniosity.

Where there was such a failure to comply with an unless order, the court had to proceed on the basis that the sanction of strike out was proportionate. The Claimants’ case was not one of the rare ones where relief was granted if the sanction was disproportionate. The factor of prejudice was insufficient and to allow re-instatement of the Claimants’ claim would turn the new approach to procedure “on its head”. The Claimants’ application was therefore refused.

Points to Note

Parties to litigation should take note that not all sanctions are equal. Here, the court has clearly differentiated between a stay and an unless order and where it will adopt a more severe approach to sanctions for a party’s repeated failure to comply with an unless order.

Where parties do indeed intend to seek relief from sanctions, applications should be made promptly, in a timely manner and with full and frank supporting evidence, in order to demonstrate to the court why relief should be granted. Failure to do so will lead the court to enforce the sanction and deprive a party from relief.

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